"They (EPFO) have to find its own ways of bridging the deficit. There is unlikely to be any subsidy for the fund," an informed source told PTI in New Delhi.
Although the Centre has announced 9.5 per cent interest to the EPFO subscribers in 2004-05, the finance ministry is yet to ratify the proposal and the rates for the previous two years.
Though finance ministry sources harped that no formal proposal had been received from the labour ministry to ratify the rates, the CBT sources said they had sent in the request.
The central board of trustees of EPFO, headed by Labour Minister K Chandrasekhar Rao, had estimated Rs 927 crore gap between what it earns on investments and higher 9.5 per cent interest to be paid to subscribers during 2004-05.
Rao, who had met Prime Minister Manmohan Singh in this regard, maintains that the EPFO would strive to bridge the shortfall on its own and if it was not possible, then finance ministry would have to pitch in.
Since interest rate became too much a political issue, the CBT had earlier recommended an "interim" 8.5 per cent to EPF subscribers, which was subsequently raised to 9.5 per cent after trade unions, mainly belonging to Left parties insisted on higher rates.
Indications are that the Central Board of Trustees would meet in May since the members expect some annoucments from the Finance Minister P Chidambaram in Parliament.
The CBT meeting scheduled in March was called off at the last moment citing technical reasons, but sources said it was more due to expectations of announcement from the finance minister in Parliament.
A finance and investment sub-committee of EPFO is learnt to have recommended 8.0 per cent returns for 2005-06, because it feels any rates higher than it would drastically "bloat" the shortfall.
In view of dwindling returns on its investment, especially after the finance ministry barring reinvestments in the special deposit schemes, EPFO had appointed a global consultant, Mercer to suggest improvements in the investment patterns.
The consultant has been given four months time to submit a report in this regard.In the midst, finance ministry had allowed non-state PFs to invest up to 5.0 per cent of their assets in equities and a similar proportion in equity-related mutual funds, which gave rise to fears that EPFO may also invest in these instruments.
However, Rao has repeatedly ruled out investments in equity or equity-related instruments, saying that the EPFO cannot afford risks by putting the workers hard-earned savings into stock market.
Alternatively, Rao has suggested allowing re-investments in Special Deposit Schemes, in which EPFO parks 80 per cent of its funds. Trade unions have also pitched for re-investments in SDS and at higher interest rates.
Rao had also mooted investments in the high interest yielding postal deposits and NSCs. All these proposals are now being looked into by the global consultant.
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